Dallas Emerges as Regional Hub for Data Centers

The need for center space increases as more multinational corporations expand, making Dallas’ location and the low energy costs in North Texas ideal for data center providers to set up shop.

by Daniel Salazar, McClatchy News Servivce
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June 25, 2014

For those in the data center business, all roads are starting to run through Dallas.

Thanks to its location and low energy costs, the Dallas area is emerging as a regional hub for data centers that connect both U.S. coasts to one another and to the expanding markets of Latin America.

Demand for data center infrastructure that connects businesses to networks is outpacing supply, said Jim Farmer, director of marketing in the Americas at California-based data center company Equinix. It operates five data centers in the Dallas area.

“In the business, [Dallas] is almost white-hot,” Farmer said.

That’s good news for the local economy, says Ryan Tharp, the Dallas Regional Chamber’s research director. He says data center providers not only help local businesses reach out beyond North Texas; they hire workers skilled in high tech to operate the centers.

Retail data centers are multimillion-dollar facilities that provide the space and security for companies to house their major computer systems and servers. Data centers give their clients access to major networks and greater bandwidth.

Farmer said major networks and the Internet’s critical physical infrastructure converge in the Dallas area. He says Dallas’ location and the low energy costs in North Texas encourage data center providers to set up shop in the area.

Low energy costs are critical to data center providers because of their high energy use for around-the-clock cooling and connectivity.

Regional gateway

Ben Edmond, chief revenue officer for networking company Global Capacity, said Dallas is a gateway to networks in Latin America.

“When you think about the Mexican and Central American markets in particular, Dallas is the primary choice,” Edmond said.

Edmond said Miami, through cables along the sea floor, is the primary American hub of choice to connect with South America. But he said Dallas and Miami complement one another in connecting to Latin America as a whole.

Brazil is the largest Latin American data market, according to DatacenterDynamics Intelligence research. Brazil accounts for about 40 percent of the region’s total data center space. Other South American markets, in Chile and Peru, are growing rapidly as well.

“We’re seeing growth rates in Brazil exceeding anything we’re seeing in the U.S. and are on par with what we’re seeing in our new markets in Asia,” said Karl Strohmeyer, Equinix’s president of the Americas.

Equinix operates four data centers in Brazil: two in São Paulo and two in Rio de Janeiro.

Mexico is the second-largest market in Latin America, according to DatacenterDynamics. The deregulation of Mexico’s telecommunications industry will provide opportunities for the Mexican market to expand in the future, Strohmeyer said.

The need for data center space increases as more multinational corporations expand to Latin America, especially to Brazil, Farmer said.

Growing need

IDC, a research firm, forecasts that data center space in the U.S. will grow about 24 percent between 2012 and 2017. It forecasts a 29 percent rate of growth worldwide.

“We’ve experienced some tremendous growth in the last 18 months,” said Aaron Alwell, vice president of marketing for DataBank.

Companies have invested heavily in expanding and updated their data storage options since the end of the recession, said Tharp of the Dallas Regional Chamber. He says that, plus the evolving nature of content, drives the demand for data space.

Data centers, also known as carrier hotels, are increasingly concentrated in not just single cities, but single buildings. Four of Equinix’s five Dallas-area data centers are in the Infomart on Stemmons Freeway.

Equinix operates the largest Internet exchange in the south-central U.S. within the Infomart, Strohmeyer said.

According to the Dallas Regional Chamber, Dallas has two other major carrier hotels, one at 400 S. Akard St. and one at 2323 Bryan St.

Co-locations

Many data centers provide co-locations to businesses and networks. That allows multiple businesses to rent space for their own servers and hardware that can connect more efficiently to major networks in the same facility.

David Liggitt, a vice president for the Data Center Solutions Group within commercial real estate company CBRE, said co-location has gained traction in Dallas especially since 2009.

Tharp said low energy costs, a temperate climate and a low risk of natural disaster in the area keep construction and operating costs low.

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